Democrat Seeks Energy Agency Data on Gas Reserve Estimates

June 27 (Bloomberg) -- A Democratic lawmaker asked the U.S.
Energy Information Administration to re-evaluate natural-gas
resources after a published report questioned whether drillers
can extract the fuel economically.

Representative Edward Markey, a Massachusetts Democrat,
said in a statement today that he wants EIA, which tracks and
analyzes energy data, to justify “optimistic estimates” of the
potential for gas production from advances in drilling in shale-rock formations known as hydraulic fracturing.

The U.S. has 2,552 trillion cubic feet of potential natural
gas resources, according to a letter from Markey to EIA
Administrator Richard Newell that cited the agency’s annual
energy outlook released in April. About 827 trillion cubic feet
comes from shale formations, the report found. The shale-gas
figure was double the EIA’s estimate for such deposits a year
earlier, according to the agency’s report.

“We need to know whether the natural gas located
underneath the surface is a real source of fuel for the next
generation, or a speculative bubble hyped by the oil and gas
industry, and echoed by the federal government’s energy
experts,” Markey said in the statement.

Markey said in the letter that the New York Times story
today on shale-gas development showed some EIA employees
“apparently have deep reservations” about projections of
recoverable natural gas resources.

Reserves ‘Skyrocketed’

In the April report, the EIA said that while forecasts for
shale-gas reserves have “skyrocketed,” the increases “embody
many assumptions that might prove to be incorrect over the long
term.”

Production rates for wells in shale “sweet spots” might
lead to overestimation of potential in the rest of an
underground formation, the agency said today in a statement.

Technical advances may lead to lower well-drilling costs
that would make shale-gas production more economical. Untested
formations, such as thin seams of gas-containing rock, “could
prove to be highly profitable,” according to the EIA report.

Markey asked the EIA to provide information on its data and
how it calculates the gas resources.

Environmental groups have opposed using hydraulic
fracturing, or fracking, which injects chemicals and water under
high pressure thousands of feet below the surface to break up
the rock. The groups say the process may pollute drinking water.
Producers say fracking expands the amount of natural gas
available and has lowered prices for the fuel.

Outside Contractors

Representative Maurice Hinchey, a New York Democrat, in a
separate request to Newell asked for information on the agency’s
use of outside contractors to complete studies by the energy
agency, as reported by the Times.

“This raises questions about the independence of their
work products, as well as question about the process EIA uses to
select private contractors,” Hinchey said today in the letter.

An official from the American Petroleum Institute, the
largest oil and gas trade group in Washington, said it was
“fact-checking” the Times story.

Companies “don’t invest billions of dollars in non-profitable ventures,” Kyle Isakower, vice president of
regulatory and economic policy at the trade group, said today on
a conference call with reporters. “The resource estimates that
have been used come from the government, and I can’t see any
reason why EIA would have any incentive to not give their very
best estimate based on the technical information that’s
available to them.”